Gold Surges Higher on Technical Momentum and Short Covering

Gold Surges Higher on Technical Momentum and Short Covering

Commentary for Friday, Feb 14, 2014 – Gold closed higher again into the weekend up $18.60 at $1319.00 so this makes for a higher market 8 days in a row. This renewed technical strength is promising and supported by Federal Reserve Boss Janet Yellen earlier in the week. Her continued support of quantitative easing is what the bulls wanted to hear and so gold is now trading above its 200 day moving average ($1310.50). On the week it has moved up $56.00 again pushed by what appears to be a slowing economy. US Industrial Production for January disappointed today causing the dollar to move lower.

Silver closed much higher today up $1.03 at $21.41 in typical silver fashion. Slow to moderate physical sales, almost sleepy but steady and then bang a big price increase. This pop has to be related to short players running to the sidelines after looking at gold. Silver is also now trading above its 200 day moving ($21.14) and if you are still on the fence remember we are still in prime discount country. Silver could double from here and still be under its recent high ($48.58 – April of 2011).

Platinum followed gold higher up $13.00 $1429.00 and palladium closed up $6.00 at $737.00. Some producers in South Africa figure that the strike now in its third week could extend until May which would mean lost production of some 750,000 ounces of platinum

So the big factors pushing the precious metals are: (1) Yellen’s commitment to further quantitative easing. (2) Technical short covering and market momentum players. (3) The fact that Congress decided this week to suspend the debt ceiling until March 2015. This is huge and barely made the papers. (4) The Chinese returned this week and again as big gold buyers.   

I am not a big fan of gold mining stocks but watch them relative to the physical market. Mining stocks have also made a big bottom after being ignored by virtually everyone and I thought the recent Casey Research comments about making a fortune in mining stocks was not well placed. Well guess what, they are moving dramatically higher with solid momentum this morning and there is also a theory that this most recent move is linked to a physical gold short squeeze.

I don’t know about that but we are in one of the most confounding periods for gold I have seen in more than 3 decades of trading these markets. Who knows where we could go from here if sentiment turns around. Worth noting is that there is no publicity on CNBC or any other media regarding gold moving above its 200 day moving average! And even the possibility that the Federal Reserve could be stuck on further reduction in quantitative easing is not being raised. If this massive injection of Federal funds cannot so easily be taped it would be a huge price factor pushing gold higher. One thing is sure and that is optimism in the physical gold trade is increasing but keep in mind we have covered a great deal of ground since December which means the profit taking paper trade might mute any deep run into the $1300.00’s this time around. 

Well here is some bullish gold news leaking into the mainstream media: (Kitco News) – Survey Participants Are Strongly Bullish On Gold Prices Next Week – A vast majority of participants in the weekly Kitco News Gold Survey are bullish on gold prices next week as the yellow metal rises above $1,300 for the first time since November. In the Kitco News Gold Survey, out of 33 participants, 26 responded this week. Twenty see prices up, while three see prices down and three see prices trading sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts. Last week participants were bullish. As of noon EST, Comex April gold prices were up about $54 an ounce on the week. Most of the survey participants this week who are bullish cite the strong performance gold put in this week as the main factor. Many of them expect gold to build on those gains headed into next week. “The gold rally has legs with upward momentum established and bouts of short covering from (an) extreme oversold situation likely to continue. With German and French indicators showing more life, the dollar/euro exchange rate could weaken to gold’s advantage,” said Jeffrey Nichols, managing director, American Precious Metals Advisors. Adrian Day, chairman and chief executive officer, Adrian Day Asset Management, pointed to fundamental reasons. “News out of Washington this week is very bullish for gold: Fed (Federal Reserve) head (Janet) Yellen was very dovish, and made clear that monetary policy would continue to be very easy, notwithstanding her indication (to) continue the taper; and the Republican Party backed away from a budget fight raising the debt ceiling with a few items of spending attached. Without the discipline of ‘sequester,’ spending and the debt will move back up. And I suspect that in the coming months, the Federal Reserve will ‘taper the taper’… cut back on the monthly reduction or skip a month. That would be bullish for gold,” Day said. A few survey participants forecast lower prices for next week, suggesting the rally in gold is due for a retreat. “My upside target for April gold (is) up at $1,326.30, which represents a 10% gain for the year. I think if we achieve it, a good amount of selling pressure coupled with profit taking could come in to the market. Lower for next week,” said Sean Lusk, director of commercial hedging at Walsh Trading.

Everything was busy today so our Activity Scale coming in at a mild 4 is surprising. The walk-in cash trade began early and the “customer run” lasted the several hours mostly repeat customers but there were a few new visitors. The phones began picking up about 10:00 AM and were consistent and busy most of the day. Something in the way of consumer business is different to a small degree. A number of deposit accounts are being created meaning the potential buyer wires money but wants to watch the price of gold for a few days before making a commitment. This form of business is relatively new in the trade and further illustrates the consumer is interested but not completely convinced. If you change your mind and make no commitment we wire the money back into your account. Not particularly my cup of tea but it is a growing trend.   

The GoldDealer.com Activity Scale is a “4” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Monday – 5) (last Tuesday – 4) (last Wednesday – 4) (last Thursday – 3) (Friday – 4). The scale is 1 through 10 and a reliable way to understand our volume numbers.

On the new GoldDealer.com site: Comex closing prices are posted on the home page and individual product landing pages. Live pricing on the site moves all bullion products up or down during the day. The change number included next to the live pricing uses yesterday’s Comex closing prices as a reference. So if the change number is green and shows up $3.00 this is in reference to yesterday’s close. You now don’t have to visit several sites to find the Comex close relative to live trading numbers which are independently verified.  

The All Bullion Products link on the home page lists all products and includes our Bid (blue) and Ask (green) prices. Visitors overlook the All Bullion Products so we reworked the link. When you hover over it with your cursor the text is highlighted.

Premium quotes vary with product and look like this – “spot plus $15.00” or “spot plus $50.00” and bullion products list them under the live prices on their respective landing pages. This makes product comparison easy and GoldDealer.com is the only site on the net with this transparency. For example click on the link Austrian Silver Philharmonic 1 oz and under Our Live Buy Price and Our Live Sell Price you will see: our Buy Premium Spot + $1.00 and our Sell Premium Spot + $02.20 – Easy.  

Live Chat is doing well and new customers like setting up their own encrypted accounts. Improvements will continue through the 1st quarter of 2014. Let us know what you want. We recommend upgrading old browsers to Google Chrome (free/secure) especially as our site becomes more advanced.    

Sign up for our daily Gold Newsletter on the Gold Newsletter page if you are so inclined and remember this is now live for you too so why not sound off? Reader insight is interesting and varied.

Email confirmation when you are buying works and further details are being added including wiring instructions. Email confirmation when you sell to us is still a work in progress.          

The four flat screens downstairs with live independent pricing (BullionDesk.com) is a big hit with the cash trade. This live stream moves all the buy/sell prices on each product so the cash buying public can see the markets move on a real time basis. Our site uses the same pricing model so no more guessing.

Our best price guarantee (buying or selling) remains famous so call Kenny at 1-800-225-7531. And for more than 30 years we have guaranteed your complete satisfaction. Like us on Facebook and follow us on Twitter @CNI_golddealer.

A reminder that GoldDealer.com will be closed this Monday the 17th for Presidents Day. Banks, commodity exchanges and the post office will also be closed. If something comes up which can’t wait until Tuesday email me at RSchwary@aol.com or go to Ask An Expert. Thanks for reading and enjoy a long weekend.  

If you are interested in Silver check out the Canadian Silver Maple learf

Canadian Silver Maple Leaf

Leave a Reply